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Wine and spirits industry left on ice as sector overlooked in EU-US trade negotiations

Wine and Spirits Industry Feels Sidelined in US-EU Trade Talks: A Sector 'Left on Ice'

In the intricate web of international trade negotiations, where tariffs and quotas often dominate headlines, one sector is raising alarms about being overlooked: the wine and spirits industry. As the United States and the European Union engage in high-stakes discussions to resolve longstanding trade disputes, representatives from the distilled spirits and wine sectors are voicing frustration over their exclusion from key priorities. This sentiment stems from a series of retaliatory tariffs that have battered the industry, with little apparent progress toward relief despite broader diplomatic efforts. The phrase "left on ice" aptly captures the industry's predicament—chilled and preserved in a state of uncertainty while other sectors thaw out.

The roots of this discontent trace back to broader trade frictions between the US and EU, particularly those ignited during the Trump administration. Disputes over subsidies to aircraft manufacturers Boeing and Airbus led to a cascade of tariffs affecting a wide array of goods. In 2019, the US imposed a 25% tariff on single-malt Scotch whisky, French wines, and other European spirits as retaliation for EU subsidies to Airbus. In response, the EU slapped tariffs on American products, including bourbon and other whiskeys. These measures, intended as leverage in the aviation spat, have had ripple effects far beyond planes, hitting the alcohol industry hard. Even as the Biden administration has sought to mend transatlantic ties, suspending some tariffs temporarily, the wine and spirits sector remains ensnared in what industry leaders describe as an ongoing "tariff nightmare."

Industry groups like the Distilled Spirits Council of the United States (DISCUS) and the Wine Institute have been vocal in their pleas for attention. Chris Swonger, president and CEO of DISCUS, has publicly lamented that while negotiations focus on steel, aluminum, and digital services taxes, the spirits sector is being treated as an afterthought. "Our industry has been collateral damage in disputes that have nothing to do with us," Swonger stated in a recent press release. He highlighted the economic toll: US whiskey exports to the EU plummeted by 33% in the first half of 2021 due to these tariffs, resulting in hundreds of millions in lost revenue. Similarly, European producers have seen their market share erode in the US, a critical export destination.

The wine sector echoes these concerns. European winemakers, particularly from France, Italy, and Spain, have faced steep tariffs on still wines, exacerbating challenges already posed by the COVID-19 pandemic, which disrupted global supply chains and consumer demand. The US market, valued at over $70 billion annually for wine sales, represents a lifeline for many producers. Yet, tariffs have driven up prices, making these products less competitive against domestic alternatives or imports from non-tariffed regions like Australia or South America. Robert Koch, president of the Wine Institute, emphasized in congressional testimony that the industry supports over 1 million jobs in the US alone, from vineyards to distribution. "We're not asking for special treatment," Koch said, "just to be part of the conversation so we can remove these barriers and get back to business."

This oversight is particularly galling given the cultural and economic significance of the wine and spirits trade. Transatlantic exchanges in these goods date back centuries, symbolizing shared heritage and economic interdependence. The US is the world's largest importer of spirits, with the EU supplying a significant portion—think iconic brands like Scotch from Scotland or cognac from France. Conversely, American bourbon has surged in popularity in Europe, becoming a symbol of US craftsmanship. Tariffs disrupt this flow, not only hurting producers but also consumers who face higher prices and reduced choices. Small distilleries and family-owned vineyards, lacking the buffers of larger corporations, are especially vulnerable. In Kentucky, the heart of bourbon country, distillers report job losses and delayed expansions due to diminished exports.

Broader trade negotiations provide context for why the sector feels marginalized. The US and EU have made strides in resolving the Boeing-Airbus dispute, agreeing in June 2021 to a five-year suspension of tariffs related to that conflict. This move was hailed as a step toward de-escalation, allowing both sides to focus on common challenges like China's trade practices. Additionally, talks on steel and aluminum tariffs, imposed under Section 232 national security provisions, have progressed, with the EU suspending retaliatory measures on US goods like Harley-Davidson motorcycles and Levi's jeans. Yet, amid these advancements, the alcohol tariffs persist in a limbo state. A temporary truce on spirits tariffs was extended in late 2021, but without a permanent resolution, uncertainty looms.

Industry advocates argue that including wine and spirits in the core agenda could yield quick wins for both sides. Removing these tariffs would boost economic recovery post-pandemic, stimulate tourism (think wine tours in Napa or distillery visits in Scotland), and foster goodwill. The US Trade Representative's office has acknowledged the issue, with Ambassador Katherine Tai noting in statements that agricultural and consumer goods are part of ongoing dialogues. However, critics point out that the administration's priorities lean toward strategic sectors like technology and manufacturing, leaving "softer" industries like beverages on the back burner.

The implications extend beyond economics. Trade tensions in this area risk politicizing what should be a celebratory industry. For instance, Scotch whisky, a $1 billion export for the UK (now outside the EU but affected by similar dynamics), has become a pawn in Brexit-related negotiations. American producers worry about long-term market access if tariffs become entrenched. Environmental considerations add another layer: sustainable practices in viticulture and distillation could be hampered by financial strains from trade barriers.

Looking ahead, there is cautious optimism. Recent summits, including the US-EU Trade and Technology Council meetings, have opened doors for sector-specific discussions. Industry leaders are pushing for a "zero-for-zero" tariff agreement on distilled spirits, mirroring past successes in other categories. Such a deal could eliminate tariffs entirely, providing stability and growth opportunities. Advocacy campaigns, including petitions to lawmakers and public awareness efforts, aim to elevate the issue.

In essence, the wine and spirits industry's plight underscores the complexities of modern trade policy, where interconnected disputes can sideline entire sectors. As negotiations continue, stakeholders hope their voices will finally break through the ice, ensuring that this vibrant industry isn't left to chill indefinitely. Without swift action, the costs—measured in jobs, revenue, and cultural exchange—could continue to mount, reminding us that in the world of trade, no sector is truly isolated. The path forward requires not just diplomatic finesse but a recognition that resolving these overlooked tariffs could pour a measure of relief into an industry eager to toast to better days.

Read the Full Fox Business Article at:
[ https://www.foxbusiness.com/politics/wine-spirits-industry-left-ice-sector-overlooked-eu-us-trade-negotiations ]